Cano Petroleum Begins Desdemona Field Study

Cano Petroleum is investing a portion of its recent $5.1 million
in equity financing to fund improvements in its Desdemona field operations and
production at the newly acquired Square One Energy property in central Texas.

As part of these efforts, Cano has engaged Forrest A. Garb and Associates,
a Dallas-based geological and petroleum engineering consulting firm, to
conduct an independent geological study of the Desdemona Field prior to
launching pilot waterflooding.

"We have developed an aggressive strategy to leverage our resources and
technology capabilities to maximize shareholder value," said Jeff Johnson,
chairman and chief executive officer of Cano. "We anticipate commencing the
initial pilot waterflood at the Desdemona Field within the next 30 days."

As previously reported, Cano's third party engineers, using year-end 2004
SEC price decks, have concluded that there are 1,065,000 barrels of proved oil
reserves. Cano estimates the field contains more than 40 million barrels of
probable oil reserves.

As disclosed in a recent 8K filing from Cano, the $5.1 million in equity
financing came from two accredited institutional investors. New Orleans-based
Pritchard Capital advised Cano on the transaction.

Cano acquired Square One Energy on March 31, 2005, for approximately
$8 million.